Brown-Forman intends to use the net proceeds of the multi-tranche
offering for general corporate purposes and to repay commercial paper
indebtedness, a portion of which was incurred in connection with the
June 2016 acquisition of The BenRiach Distillery Company Limited
(BenRiach).

KEY RATING DRIVERS

Credit Profile Erosion

The Negative Outlook reflects the continued erosion of Brown-Forman's
credit profile driven primarily by an aggressive financial policy toward
debt-funded share repurchases and expectations that Brown-Forman will
fully complete its $1 billion share repurchase program in fiscal 2017,
combined with the increased debt associated with the acquisition of
BenRiach. Fitch views the acquisition as highly complementary and fills
a gap in Brown-Forman's aged spirits portfolio. As a result, Fitch
believes leverage will increase to approximately 2.1x in FY2017 before
moderating in FY2018 to slightly less than 2x due to growth in EBITDA.
This compares to debt/EBITDA of 1.6x for FY2016.

Strong Anchor Brand, Favorable Demand Trends

Brown-Forman's ratings are supported by the sizeable operating earnings
and consistent cash flow generation that is derived from the strong and
competitive brand portfolio of one of the largest worldwide spirits
companies. Major contributors to Brown-Forman's operating earnings are
its Jack Daniel's franchise, which is the fourth-largest premium spirits
brand and the largest selling American whiskey brand in the world
including its highly successful line extensions, Tennessee Honey and
Tennessee Fire.

On an annual basis the Jack Daniel's Family represents approximately
half of the volume depletions for the company's major brands.
Brown-Forman's other major brands, Finlandia Vodka, Canadian Mist and El
Jimador Tequila, have experienced further volume pressure during FY2016.
The El Jimador-Brand Family depletion volumes declined in Mexico as the
company continues its brand repositioning at a more premium price point
via multi-year price increases.

Brown-Forman's spirits portfolio competes primarily in the premium and
super premium categories and skews toward American whiskeys. Fitch views
this as a competitive strength, because the aging process and inventory
investments required are a barrier to entry providing an impediment
particularly for value competition. Brown-Forman spirits have taken
share from beer and clear spirits, with the favorable demand trends
driven by flavored and higher-end American whiskey.

As such, Brown-Forman has experienced strong category momentum for Jack
Daniel's Tennessee Honey and the higher-priced Woodford Reserve Family
with depletion volume growth at 8% and 26%, respectively, for FY2016.
Overall, the Jack Daniel's Family depletion volumes grew by 5%. Industry
demand trends should remain positive for the foreseeable future, which,
when coupled with Brown-Forman's portfolio, would allow the company to
grow at above-average rates for the next several years.

--Net revenue flat-to-slightly negative in FY2017, and growing low- to
mid-single digits in FY2018. Underlying revenue growth is expected in
the 5%-6% range over the forecast period.

--EBITDA margins increasing in FY2017 to approximately 37.5%, and 40bps
in FY2018 driven by improved gross margins on the brands in the
portfolio.

--Capital expenditures of $108 million in FY2016, growing to over $200
million in FY2017 to support additional capex related to the BenRiach
acquisition and distillery buildout for Slane Castle.

--Free cash flow (FCF) margins growing from 4.4% in FY2016 back to the
high single digits by FY2018 driven by organic growth and capital
spending declines.

--Total Debt/EBITDA of 1.6x in FY2016 increasing to approximately 2.1x
in FY2017 assuming Brown-Forman completes its $1 billion share
authorization. Leverage moderates to less than 2x as a result of EBITDA
growth in FY2018 and beyond.

RATING SENSITIVITIES

Future developments that may, individually or collectively, lead to a
positive rating action include:

Positive rating actions are not anticipated in the intermediate term
given the expected increase in leverage and the Negative Outlook. Over
the longer term, a positive rating action would be based on continued
strong operating performance driven by the Jack Daniel's Brand Family
combined with:

--Decreased leverage such that total debt-to-operating EBITDA is below
1.5x;

--FFO adjusted leverage in the low 2x range on a sustained basis.

Any potential ratings upgrade, however, would be limited given
Brown-Forman's dependence on the Jack Daniel's franchise.

Future developments that may, individually or collectively, lead to a
negative rating action include:

--Total debt/EBITDA sustained above 2x;

--FFO adjusted leverage sustained above 3x;

--FCF margin sustained below 5%;

--A material leveraging transaction;

--Further aggressive shareholder-based initiatives;

--A significant and sustained loss of market share for the Jack Daniel's
brand.

LIQUIDITY

Brown-Forman's cash balances, stable FCF generation and substantial
credit facility capacity provide good liquidity. As of April 30, 2016,
Brown-Forman had $263 million of cash. FCF for FY2016 was $150 million.
FCF is expected to remain in a similar range in FY2017 before rising
back to $200 million-$300 million annually in FY2018 and beyond as
organic growth in the mid-single-digits and expected decreases in
capital spending offset the loss in cash flow from the Southern Comfort
brand. Fitch expects Brown-Forman will fund a portion of the acquisition
with offshore cash proceeds from the Southern Comfort divestiture and
should provide Brown-Forman an opportunity to access future
foreign-generated cash.

The company has not drawn on its $800 million five-year credit facility
that matures in November 2018, which can be expanded by $400 million.
The new 364-day $400 million revolving facility further bolsters
liquidity and serves as another backstop to support the company's $1.2
billion commercial paper (CP) program. CP borrowings were $271 million
for the year ended April 30, 2016, which leaves available capacity of
$929 million. The five-year credit facility includes an
interest-coverage financial maintenance covenant of 3x. Brown-Forman
maintains a very manageable maturity profile with $250 million coming
due in 2018.

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